SMALL and medium enterprises (SMEs), some of which may run out of cash flow by end of this month, are looking for a plan by the government to boost sales and revenue.
Government measures to improve spending are helpful, but what is needed is a well-planned programme to buy SME products.
“We can have a ‘Buy Malaysian’ campaign across the board, ’’ said SME Association of Malaysia (SME Malaysia) president Datuk Michael Kang.
Currently, a lot of online websites are already supporting local products, but businesses and the government should place top priority on local products.
“It is the demand side that will sustain SMEs. The government should earmark 30% of all procurement of goods and services to support SMEs, ’’ said Small and Medium Enterprises Association (SAMENTA) Malaysia national secretary Yeoh Seng Hooi.
The SMEs can compete among themselves via an e-tender; where they are unable to supply, the tender could be open to all.
Yeoh said a virtual national sales campaign like the Great Singapore Sale could be organised, using existing platforms like Lazada and Shopee, with the participation of SMEs.
But it is not so simple as just getting people to buy local products, we should build up their mindsets to consider local first.
We should step up on education, lead by government agencies, on the importance of supporting local SME products, as this can help revive the economy.
In a survey conducted end of August, SME Malaysia, which has 10,000 members, found that 22% of 1,713 respondents have cash flow only until end of this month and another 31% till end of November.
While the loan moratorium, which ended on Sept 30, and the special relief fund (SRF) had helped to some extent, many SAMENTA members who need the lifeline most could not draw down on the SRF, or get the approvals, said Yeoh.
With the current resurgence in Covid-19 cases, they will struggle to stay afloat if sales and cash flow do not pick up.
A different criteria of lending by the Credit Guarantee Corp is eagerly awaited; involving 400 to 600 micro businesses, the pilot programme under this new method of assessment will start at end of the year till the first quarter of 2021.
These are for smaller loans which should be evaluated based on, among other things, SME needs, viability and personality profile; at this time, it is not reasonable to just look at profits, said Yeoh.
SMEs need the chance to survive this crisis.
RAM Ratings, in its survey last month, said without an extension of the loan moratorium, SMEs may have to scale down, cease operations or default on their loans.
Based on the trend in trade payments, slower payment is observed in recent months for industries such as retail, agriculture as well as information, communication and technology (ICT); for hospitality as well as food and beverage, payment days increased over May to July but improved in August, said Experian Information Services CEO Dawn Lai.
Eakon group, which has 100 staff and has to repay over RM100,000 per month, is hoping for a loan deferment instead of rescheduling.
“In rescheduling, the installment may be reduced and extended over a longer period but deferment for another six months or more, will be more helpful, ’’ said Eakon group managing director Datuk Seri Ricky Yaw, who is servicing his repayment via an SRF of RM1mil.
With a loan of more than RM10mil, Yap is involved in contracting and maintenance of air-conditioning, and runs an academy for vocational training.
Specialising in tourist and souvenir-related products, Aesos Lai, winner of the Star Outstanding Business Award in 2018 and 2019, hopes for immediate trial vaccines to be administered.
“Tourists especially from China are the big spenders and we should prepare for borders to be re-opened, with stringent controls and possibly in phases, to those from ‘green countries’ like China, Vietnam, Singapore and Thailand, ” said Lai.
The incentive for such “baby steps” in re-opening to tourists are greatest for tourist-dependent countries like Thailand, and to a smaller extent, Malaysia.
With a small domestic market, it is tourist money that will boost retail spending in Malaysia; the effectiveness and efficiency of enforcement is of prime concern.
While trying to lure back tourists, airfares may not be affordable anymore as their capacities have been slashed.
SMEs have to innovate their business models, invest in manpower skills, enhance productivity and business efficiency through ICT, said Socio Economic Research Centre executive director Lee Heng Guie.
According to the survey by SME Malaysia, 57% of SMEs and micro SMEs have not embarked on the digital journey.
With regards to their strategies to survive the post Recovery Movement Control Order period, only 26% said they would go digital or embark on e-commerce.
About 40% said they required grants for business transformation.
SME Malaysia is working with Malaysia Digital Economy Corp to obtain funds for digitalisation based on the solutions required. The talks, which started two months ago, would hopefully have some concrete results soon, said Kang; with the current surge in Covid-19 cases, more SMEs could be in a dire situation.
In a study conducted by SME Corp and Huawei Technologies in 2018, it was found that of the 2,033 SMEs surveyed, many had merely added computers to modernise their businesses.
The main challenges in getting SMEs to digitalise involve enhancing their awareness of its benefits, equipping them with the know-how and skill sets as well as supporting them during their digital transformation.
“SMEs need to really take the new normal on board as understandably, most are only concerned about the business. This has to change, ’’ said professional services firm Tricor Malaysia chairman Dr Veerinderjit Singh.
While many stop gap measures can be drawn up, any recovery would be still be at the mercy of the coronavirus spreading around further.
Yap Leng Kuen is former editor of StarBiz. The views expressed here are the writer’s own.